Good day, and welcome to the OPKO Health Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Yvonne Briggs. Please go ahead.

Thank you, operator, and good afternoon. This is Yvonne Briggs with Alliance Advisors IR. Thank you all for joining today's call to discuss OPKO Health's financial results for the second quarter of 2025. I'd like to remind you that any statements made during this call by management other than statements of historical fact will be considered forward-looking, and as such, are subject to risks and uncertainties that could materially affect the company's results. These forward-looking statements include, without limitation, the various risks described in the company's SEC filings, including the annual report on Form 10-K for the year ended December 31, 2024, and subsequently filed SEC reports. Furthermore, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, July 31, 2025. Except as required by law, OPKO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Before we begin, let me review the format for today's call. Dr. Phillip Frost , Chairman and Chief Executive Officer, will open the call. Dr. Elias Zerhouni, Vice Chairman and President, will then provide an overview of BioReference Health as well as OPKO's Pharmaceutical business. After that, Adam Logal, OPKO's Chief Financial Officer, will review the company's second quarter financial results and discuss OPKO's financial outlook, and then we'll open the call to questions. Now, I'd like to turn the call over to Dr. Frost.

Good afternoon, and thank you for joining us. Today, we will report on the continued progress of OPKO Health's strategic initiatives and business performance. We have streamlined BioReference Health's operations as we prepare to close the sale of its oncology and related clinical testing business to Labcorp. This transaction monetizes certain assets while sharpening BioReference's focus on its core testing business and improving its financial profile. This is our second transaction with Labcorp to unlock value and accelerate BioReference's path to profitability. On the pharmaceutical side, we continue to advance our innovative therapeutic pipeline. ModeX has 2 programs in Phase I clinical trials with 3 more expected to enter the clinic late this year and early 2026. A significant catalyst for our pipeline is the Phase I data from our EBV vaccine partnered with Merck that will guide decisions regarding Phase II testing. We're pleased with the progress of our collaboration with Entera Bio to develop an oral tablet formulation of OPK-88006, our GLP-1/glucagon agonist for the treatment of obesity and MASH. Oral administration of this drug candidate has demonstrated encouraging results in animal models with in vivo data presented at the ENDO Annual Meeting in mid-July. OPKO is independently developing OPK-88006 for subcutaneous administration with in vivo data having been presented at the American Diabetes Association 85th Scientific Sessions in June. We are also collaborating with Entera Bio on a second program to develop an oral form of our GLP-2 candidate for short bowel syndrome. Our Latin American business and our Irish contract pharmaceutical development and manufacturing unit continued to perform well with increasing revenue and expanding margins even while facing foreign currency headwinds. We've taken several strategic steps to improve our balance sheet and have sufficient capital to allocate to our R&D efforts, which are partially funded by strategic partners and non-dilutive sources. In addition, we have a $200 million common stock repurchase program in place with $141.5 million remaining capacity as of June 30. As you've noted, we're committed to maximizing shareholder value through the strategic deployment of capital, additional partnerships, business development initiatives and asset sales. We're confident that this strategy will continue to add value in the second half of 2025 and beyond. With that overview, I'll turn the call over to Elias.

Thank you, Phil, and good afternoon, everyone. Let's start with an update on BioReference Health, our Diagnostics segment. We continue to restructure and right-size this business toward the goal of reaching and sustaining profitability. You will recall that in March, we announced an agreement with Labcorp to sell our oncology assets for $225 million with $192.5 million payable at closing and an earn-out of up to $32.5 million based on performance. And the earn-out will be measured 6 months post close and is based on the number of specified client accounts that are retained. We expect this transaction to close near the end of the third quarter of this year. With the pending sale of BioReference Oncology and related clinical testing assets to Labcorp, we expect the remaining business to show improving margins through the balance of the year and beyond. Post transaction, BioReference will maintain its core clinical testing operations in New York and New Jersey, and will continue to offer urology diagnostic services, highlighting our proprietary 4Kscore test for prostate cancer risk assessment as well as its clinical services business with correctional facilities on a nationwide basis. The revenue of these operations represented approximately $300 million in 2024. Now reflecting our efforts to drive operational efficiencies, BioReference's financial results continue to improve. As I mentioned in our last call, the latest reduction in force and footprint consolidation provided annualized cost savings of approximately $19 million, our headcount stands now at approximately 1,900 for the second quarter. After the close of the oncology transaction, we expect our headcount to decrease to between 1,450 and 1,500 by the fourth quarter. Now, to further grow the business, we have focused our efforts on optimizing our test menu and establishing strategic relationships in market to increase testing volumes. By focusing on the…

Thank you, Elias. Let's begin with our Diagnostics business. Revenue for the second quarter of 2025 was $101.1 million, including $24.9 million from the oncology assets being sold. This compares with $129.4 million in Q2 2024 with the decline primarily due to the Labcorp transaction that closed in September of 2024. Revenue in our non-oncology business continues to see steady growth, highlighted by an increase in 4Kscore volumes of nearly 12%, which Elias mentioned, and has been accelerating throughout the year. Total costs and expenses were $119.3 million, down from $156 million last year. This includes $29.4 million related to the oncology assets and approximately $2 million in expected onetime costs for severance during the 2025 quarter. As a result, our Diagnostic operating loss improved to $18.2 million compared to $26.6 million in Q2 2024. Depreciation and amortization expense came in at $4.9 million, down from $6.3 million in 2024. Importantly, as Elias mentioned, the actions we've taken throughout the first half of this year and those planned as we close the oncology transaction, are expected to deliver over $25 million in annualized cost savings, and we remain on track to achieve cash flow breakeven and positive cash from operations in 2025. Turning to our Pharmaceutical business. Revenue was $55.7 million, up $2.9 million from 2024's $52.8 million. Product revenue was $40.7 million, up slightly from 2024's $40.5 million, reflecting an increase in our Spanish and Mexican businesses, partially offset by foreign exchange headwinds in Chile. Rayaldee contributed $7.2 million in both the 2025 and 2024 periods with improved margins during 2025 due to the lower government rebates. IP transfer revenue rose to $15 million, up from $12.3 million, which includes our Pfizer profit share of $6.1 million compared to $6.3 million for 2024. While the first half of 2025…

[Operator Instructions] Our first question comes from Maury Raycroft with Jefferies.

This is James on for Maury. Congrats on the update. Given that new prescriptions and total prescriptions for NGENLA were up in 2Q, do you expect that the $6.1 million in NGENLA/Genotropin profit share in 2Q was due to lower gross-to-net from co-pay assistance in 1Q carrying over to 2Q? And have you received any insights from Pfizer on 2Q sales? Or do you plan to follow up with them for clarification? And I have a follow-up.

James, thanks for the questions. And we definitely saw an improvement in the U.S. market as it relates to the prescription trends that you identified. We continue to see some of the international markets that are in the early days of launches continuing to work through some of the higher cost inventory that's set out there. So, we expect the remainder of the year to pick back up to the traditional levels but we saw strength broadly across all of the geographic markets for NGENLA. So, we're pretty optimistic of where that's headed.

Got it. And then a follow-up is, how is EBITDA margin for the Diagnostics business tracking in 2Q versus 1Q? And how are you setting expectations for EBITDA profitability in 3Q and 4Q? And kind of going along with that, this approval with the supplemental application for the 4Kscore test. Can you talk about implications for growth in 4Kscore test sales in the coming quarters?

Yes. So, let me pull the EBITDA question apart. So, when we think about the Diagnostics segment, we're continuing to see quarter-over-quarter improvements in a lot of the steps we've taken to drive costs down are bearing fruit. If you were to look at the $18.2 million operating loss that resulted in Q2, consider the $2 million of nonrecurring expenses in there, you start to see that $4.5 million comes from the oncology business that is set to close later this year and depreciation and amortization expense of $4.9 million. It gets you to about a $6 million or a couple of million dollar a month loss in that segment. A lot of the costs, as Elias mentioned, are expected to come out when we close the oncology transaction in a couple of months' time and get our headcount even further down. We've been pretty judicious about making sure we maintain that business with the infrastructure at BioReference that's required to get through the closing. But once the closing occurs, we'll be able to bring the overall cost structure down as we planned. We feel we're on track to deliver those cost savings and to get to that cash flow positive basis this year, both from an EBITDA and a cash position. As it relates to 4Kscores, so we've seen really good upward growth on the test this year so far. We mentioned it's about 12% up. I think July, that really have started to accelerate, and that is before we have the FDA label change and really opens up the market for us to think about primary care docs being able to order the test. So, we think the upside is meaningful. And as I mentioned, being at 12% and meaningfully higher in July, we think, again, that the opportunity is pretty important. That test has a strong margin profile with a relatively small sales force calling on docs today.

Our next question comes from Edward Tenthoff with Piper Sandler.

So, my questions have to do with the obesity efforts. And specifically with an increasingly crowded landscape, how do you envision oxyntomodulin differentiating either as an injectable or with the oral formulation of its partner with Entera?

Yes. Thanks for the question. I mean, fundamentally, we think there is a differentiation because what we found out actually, and we studied the molecule that we created that not only is it effective in obesity, but glucagon increases the metabolism. But more importantly, glucagon has an effect downstream of glucagon on FGF21, which rises with our molecule. FGF21 is known actually to be anti-fibrosis or correct fibrosis as we know from other molecules that have been developed around FGF21. So, we believe, based on the results we have and then the preclinical data that show really a very good profile for the drug. Number one, we believe that it will have merits for MASH patients combined with obesity and diabetes. So, we will have to look at that. The second advantage, obviously, is that with Entera, we can create an oral form of the molecule. And frankly, that is something that in the information that we have from physicians is welcome because they like to stabilize the patient and convert them into oral forms to maintain the weight loss and maintain the effect over time without having to continue with the injectables. So, those are the 2 aspects. It has a biological aspect that we believe will be very valuable in MASH. And then it has a -- not just the convenience, but really a stabilization aspect of the regimen that you have to keep patients on to maintain the obesity reduction and the metabolic improvements that you hope to achieve.

That's very helpful. And then when it comes to actually proving that out in the Phase I study, are there endpoints you're envisioning or different patient populations? Or how do you think you can actually tease that out in the clinical trials?

All right. So that's a great question. So, our plan is to really go into patients who have biomarker evidence of MASH and are obese, okay? And really go into that Phase I data on that population of patients that will eventually be of interest if we get both safety and some signal of efficacy with biomarkers. We're not going to do a biopsy study. We don't want to do that until we have good evidence that both the dose and the effect are really differentiating, okay? So that's the idea. And we're basically focused on patients who have, for example, liver stiffness, liver fat and evidence that they are not only obese, but they have a fatty liver that could lead to fibrosis eventually and liver failure. So, those are the patients we're going to focus on in Phase I with a cost that is quite reasonable. But then, obviously, these developments are quite expensive. We're not going to pursue that all on our own, and we have a lot of interest coming our way about potential collaborations once we achieve the data that we need to have to really create the value of the asset forward.

Our next question comes from Yale Jen with Laidlaw & Company.

I just want to follow up what Ed just mentioned earlier. What do you -- what's your estimate of the size in terms of patients both have obesity as well as MASH? And would that be the specific sort of indication you're going to explore in the Phase I study when you presumably start later this year or early next year?

Yes. The answer is -- great question. The answer is, yes, we're focused on that population. We're going to try to focus on the patients that have biomarkers that indicate that they're in what we call F2, F3, F4 MASH -- degrees of MASH, stages of MASH. And those are the patients we're going to focus on. We're going to look for -- in Phase I for safety signals and dosing ranges, and we're not really looking for definitive efficacy, but we will look for biomarker trends that will help us. Now, in terms of total number of patients, it's hard to me to tell you the number but -- the exact number, but we're thinking between 100 and 170 patients to do the full Phase I.

Okay. Great. That's very helpful. Maybe one follow-up question here, which is, in terms of the collaboration you have with [Technical Difficulty] you have both 88006 and also you have a compound addressing short bowel syndrome. I'd just like to know a little bit -- get a little bit more color in terms of what's the difference between these 2 compounds and specifically for the short bowel syndrome compound that we probably not have too much ideas about.

Right. So, the GLP-1 glucagon receptor [ co-agonist ] is completely different than the GLP-2, right? GLP-2 is a separate molecule. and not at all in -- physiologically, not at all comparable to the GLP-1. I mean, although they have closed names, but they're not. And so, the GLP-2 has a huge function in actually intestinal absorption regulation. And that's why it's really something that a lot of people want to develop for people who have short bowel syndrome, malnutrition in tandem with that. So, it's an unmet need that has not been served very well. People get infusions of parenteral nutrition, infusion of food supplements and so on. And it's not as good as effective, and that's why the program was developed to address that unmet need, which is a completely separate population, completely different than the obesity MASH population we are trying to address with the GLP-1 glucagon. And now our collaboration with Entera is obviously adding an option, which is an oral version, which we find to be quite attractive to offer a spectrum of approaches from injectable to oral and vice versa.

Maybe to squeeze one more in here, which is when you anticipate this program to enter clinical study? Would that be next year?

Yes. I think so. Yes. And when exactly? I don't know. It depends on FDA, it depends on regulatory. But yes, I mean, definitely next year.

Our next question comes from Yi Chen with H.C. Wainwright & Company.

My question is related to the long-acting GLP-1 receptor glucagon receptor dual agonist. So today, many patients taking GLP-1 drugs, they discontinue treatment due to GI side effects and also the current GLP-1 drug cause lean muscle mass loss as well as fat loss, which is a big problem for elderly patients. So, does your dual agonist has the potential to improve either of these 2 aspects of the current GLP-1 drugs on the market today?

I hope that on GI side effects, we will be able to titrate properly, and that's an open question. I can't tell you it will or will not. I think when you look at the data of others who have GLP-1 glucagon molecules, you might have the hope that, that will be the case. But every molecule is different. Ours is really, on a preclinical basis, has a very good profile. Now in terms of lean muscle mass, I don't think there will be a major difference. There may be one because glucagon is enhancing metabolism. But I don't think anybody knows the answer exactly. Some trials by Boehringer Ingelheim and others seem to show a little bit better profile, but I really wouldn't stick my neck out here and say we will definitely have better profiles on both of these counts. But I hope that we will because of the difference in metabolic action.

Our next question comes from Michael Petusky with the Barrington Research.

Adam, I was writing as fast as I could, but not as quick as you were talking. What was the -- I don't think it's in the release. What was the BARDA revenue in the quarter? Was it $5.6 million, did you say?

Yes. So, BARDA revenue in the quarter, let me make sure I get it right. It was $6.5 million, yes, for the quarter.

[ $5-even ] or $5.6 million?

$6.5 million.

Sorry, $6.5 million. Okay. And the guide for revenue for BARDA for the year?

Sure. So, it was $30 million to $35 million for the year.

Okay. And then I guess, as you sort of think about the go forward after the oncology deal closes, does your assumption of sort of cash flow breakeven, et cetera, does that require a higher revenue run rate than sort of the, let's call it, $300 million annualized that will be left post the close? Or like essentially, does that top line have to grow in order to sort of achieve or can it sort of roughly stay around this level?

Yes. So, we've got plans for the revenue to grow, but achieving cash flow breakeven and being positive is not dependent on us achieving our growth plan.

And then I just want to, I guess, obviously, you've got cash on the balance sheet. You'll have more cash on the balance sheet presumably in the next 90 days or so. Could you guys just talk about capital allocation priorities for -- in terms of that balance sheet cash?

Yes. So, I'll start us off, Mike, and let Elias and others weigh in. As we kind of laid out early this year, we think about cash really for dollar-for-dollar of what we're spending or investing in the operations and R&D programs for us to be investing back into the balance sheet. And that's been pretty close to where we've been this year for the first half. I think we -- when we did the debt exchange in April, that accelerated the use of cash for our balance sheet strengthening a little bit faster than probably what we planned in January. But I'd say this year, we expected to use a little over $100 million in investing in R&D. We remain on track with that as it relates to how much cash we've put in our stock buyback program as well as the convertible debt exchanges, we're in the -- approaching $80 million so far this year and would expect to continue to buy back shares as opportunities exist. And as we think forward, it's probably not going to continue at that same accelerated pace on the capital side. We'll also be mindful of how we are able to partner any of our R&D programs to continue to try to find non-dilutive sources of cash to fund those programs and accelerate those like we did with our relationships with BARDA. So hopefully, that helps.

It does. Can I just ask maybe just a slight clarifying question. The stock obviously is, in my opinion, hasn't reacted much to sort of some of the improvements that you guys are making. It seems like you're on the path to making, particularly in the lab business. And I'm just curious, does that create, I guess, any extra urgency in terms of sort of completing the common share repurchase?

Yes. I mean I think the Board has authorized us to go up to that $200 million. So, we have about $142 million or $141.5 million left to deploy. And I don't think we will be shy about using it as the balance sheet allows.

This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Frost for any closing remarks.

Thank you. Thank you all for your good questions and for participating in general. I'll close by observing that many of the things that we have talked about at previous meetings have really come to fruition. We have emphasized in the past the use of our assets in such a way that will be beneficial for the company and the shareholders. And the disposition of the 2 parts of BioReference so far are good examples of that. And the remaining part is certainly becoming a more valuable asset, which we're very happy about. So far as the expenditures are concerned, which are major for us, they're largely for R&D, and we consider those, as Adam mentioned, investments. And we consider them to be interesting and good investments in the sense that the -- many of the projects are quite novel. They're on the high-risk side, I would say. And so, we can't guarantee anything. But we also believe that the potential returns for these projects are significant. And it's for that reason that we feel good about what we're doing. So, I'll leave you with those thoughts. And again, thank you once again and look forward to being with you again a quarter from now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.